Sunset Media Tower, where the House of Blues has its offices, could be the newest addition to Kilroy Realty Corp.’s large L.A. real estate portfolio, according to sources with knowledge of the talks.

Owner USA Sunset Media Management, an L.A. real estate investment firm, is in negotiations with the real estate investment trust to sell the 22-story building, which it bought for $82.5 million in 2005. Financial details of the negotiations were not disclosed.

The 321,000-square-foot 6255 W. Sunset Blvd. property at the corner of Vine Street is 83 percent leased. Among the tenants are the AIDS Healthcare Foundation, a Comerica Bank branch and, on the ground floor, the Waffle restaurant.

Kilroy, headquartered in West Los Angeles, owns 25 L.A. office buildings, including 12200 W. Olympic Blvd., a new-media property where online video service Hulu and comparison-shopping site Shopzilla Inc. are tenants. Its portfolio of 109 office buildings in California and Washington spans 11.8 million square feet.

Sunset Media Tower would be Kilroy’s fifth acquisition this year. It has so far spent $381 million acquiring 1 million square feet along the West Coast from San Diego to Seattle.

Kilroy’s target, the sources said, is to acquire five additional properties by the end of the year, including two in San Francisco. The acquisitions are expected to top $400 million.

The pickups are being funded by a mix of equity, unsecured debt, mortgages and other financing. The REIT raised $221 million in an April secondary offering of more than 6 million shares priced at $38.25.

Prior to this series of executed and planned acquisitions, Kilroy historically developed most properties in its portfolio. However, the sources said, depressed prices for quality buildings in the current market have caused it to reconsider that strategy.

In the first quarter, Kilroy’s funds from operations, a key REIT metric, were up 14 percent to $30.1 million and revenue rose 25 percent to $88 million. However, Kilroy’s funds from operations of 55 cents per share missed by 2 cents the average expectations of analysts polled by Thomson Reuters.

Shares closed at $38.30 on June 23, down 2 percent for the day but up nearly $2 since the beginning of the year.

Kilroy declined comment.

CB Richard Ellis Group Inc. brokers Robert A. Waller, Tina Lee and Patrick Amos, who represent USA Sunset Media, did not return calls or e-mails for comment.

Vertical Expansion

Lockton Insurance Brokers has decided to stay in downtown Los Angeles after searching countywide for new offices.

For reprint and licensing requests for this article, CLICK HERE.

Prev